The persistent
weakness in technology this year has been one interesting sight to behold. Today, the NASDAQ did a typical tease around
the pseudo-important level of 2000. I do
not even dare count how many times in the past 4 years that the NASDAQ has
danced around the magical 2K level, but I suspect the market is about to add a
lot of days to the running 2K madness. Before
the NASDAQ finally gives up its games and breaks lower, I thought I would whip
out a quick bearish piece so that I can look like a genius sometime this summer….or
earlier.

Actually, a
blurb I read in this past weekend's Barron's finally got me motivated enough to
write about my latest guesses: "John Roque, the
technical analyst at NatexisBleichroeder,
points out that, excluding the energy and materials sectors, the rest of the
S&P 500 is down a striking 6.3% this year" ("Aging
Bull Suffers From Bad Breadth" by Michael Santoli,
Barron's, March 21, 2005). This means that were it not for energy and
materials stocks, the general market would look about as weak as the NASDAQ
does (the NASDAQ is down about 8% this year).It means that those folks who have been smug in their anti-tech stance
have really been relying on the narrow performance of two sectors to make their
point.Most of all, it means that as
tech goes, so will the market, and right now, the going is not looking too
good.

Minor bounces,
snapback rallies, and oversold buying sprees aside, this market looks very weak
to me (look for one of these teaser rallies to mark the post-Fed action in the
next week or two). The complacency phase of the
recent trading range ended with a bang. I declared the phase over with the Ebbers conviction, but perhaps the blow-up of GM last
week was a more important marker. GM
made a big whiff as it predicted a major earnings shortfall for the coming
year, and the stock took a most convincing 14% tumble right past the $30 option
"strike" price that should have held right before the expiration of
March options. Adding to my list of worries are the following
"big-boy" stock worries in tech and retail:

1.Intel (INTC)
issues what was supposed to be a bullish mid-quarter update and promptly fades
6% in the next 4 days.

2.Best Buy (BBY) continues
to languish below its 200 day
moving average (DMA). It has spent most of the last 4 months below its 50
DMA, and this technical indicator has been ramping downward for the last 3
months. BBY is important as a sign for discretionary consumer spending.

3.Bed, Bath, and Beyond (BBBY)
has recently failed at is 200 DMA and in the past weak has pointed straight
down. BBBY is important as a "home-maker" stock. Housing-related economic activity has been strong for several years now.

4.Home Depot (HD) is another important
home-maker stock. Its stock chart has gotten ugly quickly again. I thought that the earnings report in late February
would provide the shield to save the stock. After some brief celebration, HD resumed its slide and has now broken hard
below its 200 DMA.

5.After making a
nice breakout move last November as part of the big post-election rally, Dell (DELL)
has slowly but surely worked its way back for a nasty roundtrip. Its 50DMA is
now pointing downward.

6.Cisco (CSCO) has
been irrelevant for a while, but I will include it anyway as a former tech
"big dog." A long-term view of the chart shows that the stock is on
the edge of breaking downward from a sluggish trading range it has struggled to
maintain since a mini-collapse in August of last year. Its 50 DMA has been
ramping downward all year.

7.Wal-Mart (WMT)
is the company everyone seems to care about…except for traders. This one has
essentially gone nowhere since 1999!!! Hard to believe right? Wal-Mart is
supposed to be the quintessential retailer - the corporation everyone wants to
emulate. Yet, investors have been rewarded with almost nothing for the entire
21st century…and then some. I mention them only to call your
attention to what looks to be sure and steady weakness that I suspect will drag
the stock down another 10% to the lowest points of
this dreadful trading range. This move alone will finally set off alarm bells
in retail stock-land….even if overall it will be the same old story for WMT.

It is of
course easy to come up with signs of weakness when the overall market is weak.
These stocks are just pieces to the obvious overall story you get from looking
at the major market indices. But the one stock I have been watching the most lately
is IBM. It has been an excellent barometer on what folks really think about
tech. Its struggles have been tech's struggles. And at this point, I cannot
imagine any real or sustained rally in tech (or the S&P 500 for that
matter) that does not include IBM. At the juncture of Dec/Jan, IBM failed to
take out 2004's high of around 100 and has been spiraling downward ever since.
Watching IBM in 2005 has allowed me to remain skeptical about the market all
year. I post two views below to explain my thinking in more detail.

Now, of
course, there is no guarantee that IBM is headed for such a nasty tumble, but
the alternative seems even less likely. I will again point to the
behavior during last week's options expiration. The $90 point should have held
fast as a point where the stock gets "pinned" from the push and pull
of longs and shorts battling over positions at this point. Instead, IBM cut
clean through this important level on the day of expiration. This behavior was a
sure sign of weakness. I will remain unconvinced that IBM is a good buy (and
thus much of tech) until first the stock can break up and above $95. After
that, IBM will have to crack and maintain $100 to look like a good longer-term
prospect again.